Calculate monthly car payments and total cost of your auto loan
Monthly Payment
$508.09
for 60 months
Loan Amount
$26,600.00
Total Interest
$3,885.45
Sales Tax
$2,100.00
Total Cost
$36,485.45
An auto loan is a secured loan used to purchase a vehicle. The car itself serves as collateral, which typically results in lower interest rates compared to unsecured personal loans. Understanding how auto loans work can help you make smarter financing decisions and save thousands of dollars.
Auto loans use amortization, meaning each monthly payment includes both principal and interest. Early in the loan, most of your payment goes toward interest. As you progress, more goes toward reducing the principal balance.
Important:The longer your loan term, the lower your monthly payment, but the more total interest you'll pay over the life of the loan.
Aim for at least 20% down to reduce monthly payments and avoid being underwater on your loan.
Compare rates from banks, credit unions, and dealerships to get the best deal.
Shorter loan terms mean higher monthly payments but significantly less interest paid overall.
Remember insurance, maintenance, fuel, and registration when budgeting for a car.
A higher credit score can qualify you for significantly lower interest rates, saving thousands over the loan term.
Don't finance more than the car is worth. Make a substantial down payment to avoid negative equity.
Most lenders require a minimum credit score of 600-650 for auto loan approval. However, scores above 700 typically qualify for the best interest rates. Scores below 600 may still get approved but with higher rates.
Compare both options. Dealers sometimes offer promotional rates (0% APR), but banks and credit unions often have better standard rates. Get pre-approved from your bank before visiting the dealer to have leverage in negotiations.
Financial experts recommend 48-60 months maximum. While 72-84 month loans offer lower payments, you'll pay significantly more interest and risk being upside down (owing more than the car's value).
Most auto loans allow early payoff without penalties, but always check your loan agreement. Paying extra toward principal can save significant interest and help you own the car sooner.
Gap insurance covers the difference between what you owe and the car's value if it's totaled. It's recommended if you put less than 20% down or have a loan term over 60 months.